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Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

August 27, 2014

Confusion Reigns as the Question Persists: What Exactly Is Omnichannel?

By Jim Tompkins
CEO, Tompkins International

I recently read a July 2014 report titled “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing.” While there are a few points in the report that show some understanding of omnichannel, I also disagree with many of the points it presents and believe it only adds to today’s confusion surrounding omnichannel.

Consider the following quotes from the report, as well as my thoughts:

  • “Digital retailing is capturing headlines and inspiring spirited debate as retailers plan how best to invest for future success. But beyond the headlines, physical stores remain the foundation of retailing, evidenced by the fact that 90 percent of all retail sales are transacted in stores.” This is simply untrue. Omnichannel means all channels work together to provide a great customer experience. Most customers use multiple channels to shop, so to credit the channel where the actual transaction takes place indicates a total lack of understanding of omnichannel.  In fact, where a sale is transacted has nothing to do with the importance of omnichannel. Think about it this way: If a customer finds an item that they like online and then goes to the store to buy it, is this an online sale? No. Is it an in-store sale? No. It is an omnichannel sale. Accounting systems that track where a sale takes place have nothing to do with the concept of omnichannel. Therefore, it is critical to identify the capabilities of your many segmented supply chains and enable them to achieve omnichannel sales potential at a minimal cost.
  •  “Physical Stores are clearly customers’ preferred shopping channel and a place where the most significant consumer and retailer value continues, and will continue, to be created.” This is also completely untrue. Place this in the context of the August 8, 2014 Wall Street Journal article “Shoppers Flee Physical Stores.” The opening sentence reads: “US retailers are facing a steep and persistent drop in store traffic, which is weighing on sales and prompting chains to slow store openings as shoppers make more of their purchases online.”  Omnichannel is not about a competition between channels.  In fact, retailers need to realize that customers do not even think about channels. Channels are the retailers’ issue. Customers want to buy from you and use your various channels to support that purchase. Shopping is not about having a preferred channel—it is about finding the price, selection, experience, and convenience that fills your needs. Shopping must be omnichannel! Look at requirements of today’s final delivery to customers and you can see the major transformation that is occurring with same-day, next-day, second-day, and local delivery service providers. Innovation in final delivery is clearly being driven by the shopper fleeing the physical store and preferring alternative shopping channels.  This may lead to a need for retailers to be creative in driving traffic to the stores, but clearly how retailers make innovations in their delivery capabilities is the key to future growth.
  • “The store plays a crucial role in online purchases, as two-thirds of customer purchases online use a physical store before or after the transaction.” The whole point is that all channels work together for omnichannel success.  All channels are critical, and a strong channel management strategy is the answer to the success of retail.  Stores that support online are what omnichannel is all about. In a similar way, online helps stores: more than 60% of all retail purchases are influenced by online. But, this does not mean stores or online are the keys to success. This means that omnichannel holds the true key to success.
  •  The future of retail is solidly anchored in the brick-and-mortar channel.” Again, this is nonsense. If a portion of your channel management strategy is to have stores, then these stores will play a key role in your omnichannel strategy. But the future of retail is not in one channel or another, but in omnichannel.  Retailers that do not recognize this will not only operate with a channel strategy that is inflexible and unable to adapt to the rapid changes in customer preferences, but the supply chain will be a huge driver for escalating costs and act as a bottle neck to achieving best-in-class customer satisfaction.

When I first read the article, I was confused. But then a second, more careful read brought an answer: A short excerpt about the study reads: “This independent survey of consumers and retail executives was funded by, and completed in cooperation with, leading U.S. shopping mall real estate developers.” There you have it—so much for trying to make sense out of nonsense.

Photo Credit: Tim Reckmann

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Supply Chain Leadership Forum Hits High Point in 10th Year

August 25, 2014

Supply Chain Leadership Forum Hits High Point in 10th Year

 

By Jim Tompkins
CEO, Tompkins International

It’s finally here—the opening day of the annual Tompkins Supply Chain Leadership Forum.

I think that I’m more excited about this year than any other, and I certainly have some great reasons to feel this way today as I sit in Nashville pondering how far this event (and the field of supply chain in general) has come.

At the decade mark, the forum boasts some of the highest quality speakers and sessions available in the world, has greatly surpassed previous attendance records, and has evolved into the premier event for supply chain and logistics leaders. I could not be more proud of this 10-year-old!

The forum is where big ideas are created and lasting business relationships are made. It’s also where some of the brightest leaders in the industry come together and share best practices, key challenges, and recent discoveries.

I will be joining top supply chain leaders for a kick-off reception sponsored by JDA Software Group this evening, and then I’ll be presenting the opening keynote, Responding to the Alibaba Effect, tomorrow morning. (You can watch my video on this hot topic here, in case you missed it.)

If you’d like to get the latest Leadership Forum updates, follow us on Twitter (@jimtompkins) and use hashtag #SCLF2014. Don’t forget to connect with us on LinkedIn and follow us on Facebook too.

Here’s to an awesome event, and I can’t wait to get started!

More Resources

Top Highlights from 2013 Supply Chain Leadership Forum

2014 Session Topic Areas for Supply Chain Leadership Forum

Photo Credit: Elliott Billings

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Doubts About Alibaba and Jack Ma? Find Out Why the Critics Are Mistaken

August 18, 2014

By Jim Tompkins
CEO, Tompkins International

Jack Ma

Jack Ma, Alibaba founder

I was fascinated this past week when it was reported by the The New York Times (among others) that “Doubt is Cast on Vetting of Deals by Alibaba.”

As everyone knows, I am a keen student and researcher of Alibaba. In my recent video, The Alibaba Effect, I discuss not only the amazing story of the e-commerce giant—nearing its announced IPO in just a few weeks in the U.S.—but I also comment on the intelligence, entrepreneurship, foresight, and risk-taking of its renowned leader, Jack Ma.

The newspaper reported, essentially, that Alibaba has been on a buying spree since 2013, spending billions to acquire stakes in businesses such as department stores and mapping services in China, as well an array of technology start-ups in the U.S. In addition, the article indicates that its recent acquisition control of a Hong Kong film company just two months ago (now called Alibaba Pictures Group) might not have been “fully vetted,” and that “possible non-compliant accounting issues” have since been discovered.

The article further asserts (via “experts”) that “Alibaba has little expertise in many of the new businesses,” which means that it has to rely on incumbent managers in business decisions; and, that “Alibaba, like most Chinese companies, does not have the ability to manage the increasing number of unfamiliar yet decentralized divisions and people.”

I find these assertions fascinating because the so-called “experts” are most often those who do not take risks, do not experiment, and do not learn by doing.  Jack Ma has been pushing the envelope, out-learning them, and moving forward with a speed unheard of by Western analysts. He has a great vision, is on a path to learn rapidly, and is following that with passion.

Whether or not a financial or accounting detail was missed by his highly qualified advisors is not the point, and it is certainly not any criticism to be considered in the soon to be conducted IPO.

Interestingly, the critics have also recently reported certain structural weaknesses or irregularities in Jack Ma’s corporate organization. Amazingly, he acted within a week to adjust these to provide more clarity and transparency, as well as reorganize them to meet more “commonly accepted standards.”

Jack Ma has publically discussed his goal of growing a major global business for the long term, while moving quickly to build his presence in the short term. As I discuss in some depth in The Alibaba Effect, he is doing just that. The ramifications for any business in the world are significant, and we are encouraging, and working with, many companies to prepare for and take full advantage of these effects.

As Alibaba’s founder follows this rapid roadmap, he is quickly learning about different industries—e-commerce, Internet and store retail, banking, Internet video, mapping services, microblogging, web browsers, and now entertainment, as well as learning more and more about different countries and cultures.

I very much doubt this fast-paced “study, acquire, learn, and profit model” will slow down, either before or after the IPO. He is taking calculated risks to apply this model and turning it into a big advantage.

Others can criticize and use old-school criteria to find faults, but Alibaba and Jack Ma are changing the world while the debates persist. As some wise people have stated before, “Either get on the fast-moving train or get out of the way.” And as the video conveys, smart companies will prepare now for the growth and profit ride.

What are your thoughts on Alibaba’s fast track towards success? How are you preparing to compete?

 

More Resources

Article: Alibaba Group Seeks Market Share

Blog Post: Flipkart: A Threat to Alibaba? Not Really

Article: Alibaba: The New Face of American e-Retail?

Photo Credit: World Economic Forum

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Five Major Changes Happening Right Now in Industrial Distribution

August 13, 2014

By Jim Tompkins
CEO, Tompkins International

Big things are happening in today’s industrial distribution landscape—five big Bolts
things, to be exact. And they are causing an uproar in the industry as they all occur simultaneously. The five big changes happening now are:

1. Experience
2. Convenience
3. Selection
4. Price
5. Competition

Let’s take a closer look at experience. This means everything from real-time product availability and enhanced search, to improved product descriptions and streamlined checkout. Experience also includes mobile, order history, personalization, workflow management system, and free shipping and returns.

In terms of convenience, today’s speed of delivery is “getting local.” This is evolving rapidly as industrial distribution consolidation continues to pick up pace, and it is also fueled by both eager sellers and eager buyers. Multipliers are high and both financial and strategic buyers have the available funds to invest. As a result, this consolidation is in more physical locations closer to their customers, and therefore available for delivery.

Today’s customers demand a selection that has broader variety and depth of product offerings. This can be done through mergers and acquisitions (M&A). By buying distributors who offer different products and then integrating these distributorships, you are able to offer a larger selection of products to both your customers and the customers from the firm you acquired. Many customers want to buy from fewer distributors, so M&A not only offers customers a wider selection, but also results in increased revenues.

Another way to increase selection is by acting as a marketplace. You can do this by offering products for which you do not stock inventory, but rather pass the order onto your marketplace partner who drop- ships the product to your marketplace customers. This stockless production can literally allow you to offer an “endless aisle” of product offerings without increasing inventory.

Of course, price is always an important factor. Again, this is a potential benefit of M&A. By broadening your selection, you are able to sell more products to each customer (and thus have larger orders). By having larger orders, you can create more efficient operations and reduce final delivery costs. This results in lower prices passed on to your customers.

Another price reduction avenue is to cut out your supplier and go directly to the source and offer your clients private label. This can often not only result in reduced selling price, but also bring increased margins and brand loyalty.

Finally, you have to work in a competitive environment to change the landscape of the industry. Since other distributors are addressing the above five changes, you need to as well. They are improving experience and convenience for your customers, and they are selling a broader selection of products at a reduced price.

To maintain your position in the marketplace, make a strong stand on these five fronts. In addition, there are new competitors you need to understand:

  • Product manufacturers who create their own website for MRO components that includes extensive knowledge considered a unique selling position by distributors. Your customers would go direct to these manufacturers and cut the distribution link out of the supply chain.
  • Product manufacturers who list on marketplaces and sell directly to your former customers for MRO. To grasp the potentially largest threat going forward on this topic, understand the positioning of e-marketplace Alibaba. Learn more about what Alibaba means for your company in my video, The Alibaba Effect. You won’t want to miss it.
  • Pure online B2B players who sell products to your customers.

You can’t stay where you are and expect to be successful. You must make substantial improvements in experience, convenience, selection, price, and competition. Industrial distribution is experiencing a huge transformation—and so must you.

 

More Resources

Video: The Alibaba Effect

Blog Post: Flipkart: A Threat to Alibaba? Not Really

Blog Post: The ‘Risky Business’ of Supply Chains

Flipkart: A Threat to Alibaba? Not Really

August 4, 2014

By Jim Tompkins

FishIndian e-commerce site Flipkart made a loud splash last week when they raised $1 billion in fresh funds. Obviously, this was done in preparation for competing with giant online retailers already well-established as big fish in this pond.

Flipkart is India’s largest e-commerce company, so the announcement was big news. But as I explain in my latest video The Alibaba Effect, Alibaba is so well-positioned with funding, advanced technology, logistics, customer service, and marketing that Flipkart is no threat to the Chinese e-commerce marketplace titan.

It’s All in the Numbers

Consider their shipping volumes over the past 12 months—Alibaba shipped 5 billion units and Flipkart did 60 million. I truly believe that Flipkart will not be the big player that many are projecting, and they will be limited in their global reach. This also seems clear when we compare last year’s network users for each company: 231 million people in China used Alibaba, while Flipkart reported only 22 million network users in India.

As for products sold, check this out: 1 billion unique items sold by Alibaba versus 15 million unique items sold by Flipkart.

Now, let’s compare the two companies’ progress on sales and on IPO prospects. *

Alibaba.Flipkart table

*All data and numbers are from publicly available information

Yes, analysts expect e-commerce to take off in India as its population gains more disposable income, but China is already the fastest growing consumer market in the world. So the bigger e-commerce story here, hands down, is Alibaba and its brilliant founder Jack Ma.Yes, analysts expect e-commerce to take off in India as its population gains more disposable income, but China is already the fastest growing consumer market in the world. So the bigger e-commerce story here, hands down, is Alibaba and its brilliant founder Jack Ma.

What are your thoughts on recent developments in the e-commerce global marketplace? Do you think that Flipkart has any chance of swimming with the big fish?

 

More Resources

Blog Post: The Final Delivery Game: Ship from Store, In-Store Pickup, or Lockers? 

Video: The Alibaba Effect

Article: Final Delivery—Shop. Select. Deliver

The ‘Risky Business’ of Supply Chains

July 29, 2014

By Tompkins International Staff

Risk report front pageWhen some of us hear the words risky business, we might think of Tom Cruise’s infamous movie (tube socks sliding across the floor and all).

But there is risky business to think about with supply chains too, and it’s a subject that supply chain leaders aren’t talking about enough these days. Managing risks and recovery is a critical element of your supply chain planning.

Our new report, Risk Management and Recovery, peels back the layers to today’s greatest supply chain risks, mitigation strategies, and recovery plans. The report is based on a March 2014 survey by Tompkins Supply Chain Consortium, so it guarantees a realistic perspective into what current companies are really doing and thinking.

Interestingly, the survey reveals that today’s top external sources of risk are: market changes, raw material availability/commodity price fluctuation, and weather/natural disaster disruption. Specialized skill sets/employee expertise is the greatest supply chain risk to current operations, according to those surveyed.

Download the report for further insights into this topic, including a time-to-recover questionnaire and a risk assessment. Do you agree with the top sources of risk? What are you seeing as the top risks at your organization and what is your recovery plan?

 

More Resources

Supply Chaincast Global Trade and Risk Management: Capturing the Business Value

White Paper Demand-Driven Value Networks: Beyond Lead Time and Cost Reduction to Integrated Management of Risk and Compliance

Blog Post What Are You Doing to Manage Global Trade Risks?

Today’s Final Delivery Trends: Where Does Your Company Stand?

July 17, 2014

Bruce

 

By Bruce Tompkins
Executive Director, Tompkins Supply Chain Consortium

What does the phrase ‘get local’ mean to you? No, it doesn’t mean ‘get local’ while traveling or ‘get local’ in your neighborhood.

It’s a call to action for supply chain leaders everywhere. From a supply chain perspective, ‘get local’ means meeting your customers’ final delivery demands—from personalization to speed of delivery (and everything in between).

Tompkins Supply Chain Consortium was interested in companies’ final delivery capabilities, so we recently conducted a survey to our database on this topic. We found that many companies are ‘getting local’ to be successful in final delivery.

The survey took a closer look at the challenges companies are facing for final delivery, and what plans they have for the future. Read the full results and analysis on this topic by downloading the new report, Final Delivery: Today’s Companies Are ‘Getting Local.’

The report reveals that same-day delivery is not as common as we assumed. In actuality, two-day and next-day are the most popular delivery options. Added charges for same-day and next-day delivery are also very common.

Companies are also ramping up their personalized options. The report shows an increase in store pickup and delivery locker options for customers. Standalone fulfillment centers are on the rise, which indicates companies are ‘getting local’ by improving volume and availability.

In my opinion, we will continue to see these trends grow. Are you seeing any of these trends in your supply chain? How is your company evolving its final delivery capabilities? Are you ‘getting local’? Let me know in the comments.

 

More Resources

Blog Post: The Final Delivery Game: Ship from Store, In-Store Pickup, or Lockers?

Video: The Alibaba Effect

Article: Final Delivery—Shop. Select. Deliver.

Article: Final Delivery for Consumer Products Companies

Trending: Effects of West Coast Ports Labor Dispute

July 14, 2014

By Chris Ferrell
Director, Tompkins Supply Chain Consortium

Container shipRetailers are paying close attention to labor disputes threatening to bring a stop to imports coming in to West Coast ports. They are anxiously awaiting (and hoping for) a successful dock worker agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).

Retailers rely heavily on these ports for imported goods coming in from Asia. How could this affect them in the long run? Will this continue to be a major disruption?

We do not expect the ongoing labor negotiations at the West Coast ports to cause a substantial interruption on a wide-spread basis. Shippers still bear the scars from the disastrous 2002 work stoppage and have countermeasures in-place to avoid major disruption.

While it is true that retailers still rely heavily on the U.S. West Coast ports, on a percentage basis they are not as reliant as they used to be. Even when there isn’t a threat of a West Coast work-stoppage, retailers are utilizing Atlantic and Gulf ports to support stores in the Eastern half of the U.S. a lot more than even a few years ago. Savvy shippers have also diversified West Coast destinations to include Vancouver and Prince Rupert in Canada where labor disputes are not at issue.

So, while the West Coast situation may cause a minor up-tick in freight being routed to the Eastern Ports (Eastern freight is up from 38% in January to 41% in May, according to Hackett Associates), it won’t go a lot higher because the Eastern routes have been running near capacity for several months and are now basically full.

What we’ve primarily been seeing is retailers advancing their order timeline—bringing the goods into the same ports as always but ahead of any potential West Coast work stoppage. According to the National Retail Federation, cargo volume into the West Coast was up 6.6% in May over the previous year, with estimates for June being even higher. Even when factoring in an economy that is healthier than a year ago, these numbers suggest retailers are pre-loading Holiday inventory.

Bottom line: the mere threat of a West Coast work stoppage has already been a major imposition and inconvenience to shippers but the actual risk to the 2014 Holiday season is much less.

What are your thoughts on this issue? Do you agree with these predictions? Share your opinion in the comments.

 

More Resources

Article: Inland Port Development: What is the Impact on Shipping Patterns, and How Can 3PLs Take Advantage?

Blog Post: Who Will Win the Race for Freight in the Panama Canal Expansion? Shippers.

Blog Post: West Coast Port Strike Exposes Need to Keep Global Trade Moving through ‘Dual Action’

Photo Credit: Jim Bahn

Thoughts on Upcoming Alibaba IPO: What’s in a Name or Number?

July 7, 2014

By Jim TompkinsNYSE

Since 1999, when Alibaba first started their marketplace of Alibaba.com, it has been clear that the Chinese company has a strong passion for the U.S.

With the recent news of Alibaba going public, some are surprised that they selected the New York Stock Exchange (NYSE) over NASDAQ, that the ticker symbol will be “BABA” and in my view, puzzled as to why the date and price of the IPO will involve the numbers “8″ and “9″. None of these things come as a big surprise to me.

A few revealing points to consider on the Alibaba IPO:

  1. There was an active discussion about where Alibaba would go public. To some, the two finalists were New York and Hong Kong. Unless there were compelling business reasons to the contrary, the answer was always going to be New York because Jack’s vision has always been to be a global firm with a Chinese philosophy and an American base.
  2. The selection of the NYSE over the NASDAQ. For the same reasons that #1 is not a surprise: the NYSE is the largest stock exchange in the world by market capitalization and can also be classified as “more American.”
  3. The ticker symbol “BABA” also was predictable. The two Chinese translations for the word BA are “8” and “fortune”, “wealth” or “prosperity.” Additionally, 8s are very prominent in China—from flight numbers ending in 8, to the opening ceremony for the Beijing Olympics on 8/8/08. Telephone numbers with 8s are also valued, as is the 88th floor of buildings. This significantly stands out in pricing as many ending with 8 (1.88, 2.88, etc.).
  4. Consistent with #3, I anticipate the date and price of the IPO to involve the numbers “8” and “9” (the number 9 translates into “long lasting”). Also, for the exact opposite reasons, I do not expect to see the “unlucky numbers” 4, 5, or 6 associated with the date or offering price for the stock.
  5. The new “All-American” name of the Alibaba marketplace, 11 Main. We get that 11 Main is on Main Street, as in Main Street USA. So, the connotation is not a supercenter or a mall, but rather on Main Street. This is a clear indication that 11 Main will be anti-big box, anti-mass merchant, and a pro-neighborhood shop—a place not to buy everyday common products, but a venue to buy unique and exciting products. But what is so special about 11? This instantly makes me think of 11/11, which is Singles Day in China. Before November 11 was the big Chinese shopping day, it was the big relationship day in China. November 11 was traditionally the day that boy meets girl, who then lived happily ever after. The number 11 then, not from Chinese tradition, but from Singles Day, means a personal relationship. So, what the 11 in 11 Main translates to is a neighborhood place where there is a strong relationship between the merchant and customer. It is a very cool marketplace for the first wave to hit the American shore. But it is not BABA Main, I mean 88 Main, it is 11 Main.

And finally, it is fascinating to watch how Alibaba is changing the way supply chains are viewed in the U.S. In my new video, The Alibaba Effect, I discuss these points in more detail. What you will hear is critical and will help you plan your counteroffensive now and lead your company to success in omnichannel.

 

More Resources

Blog Post: Who Are Today’s ‘Titans’ and ‘Industry Leaders’ in Omnichannel? – Part 1

Blog Post: The Final Delivery Game: Ship from Store, In-Store Pickup, or Lockers?

Paper: Final Delivery – A Roadmap: Drivers and Enablers for Moving Ahead of the Competition

Photo Credit: Daniel Foster

Top 6 Reasons Why You Should Watch The Alibaba Effect

June 27, 2014

By Tompkins International Staff

5652699228_68587eb26c_zHow many of you have heard of Alibaba, the Chinese e-marketplace? Alibaba is the fastest growing e-commerce company in the quickest growing market in the world. CEO Jim Tompkins recently sat down to discuss how Alibaba is changing the way supply chains are viewed in the U.S. Here are the top 6 reasons why you need to watch The Alibaba Effect:

  1. Alibaba does 80% of the online business in the largest e-commerce market in the world.
  2. Out of every dollar of revenue, Alibaba makes 43 cents profit.
  3. Alibaba marketplaces have more than 10 million sellers and more than a billion product listings.
  4. Jack Ma, founder of Alibaba, and Alibaba itself have invested over $1 Billion in businesses in the United States.
  5. Alibaba is planning to invest more than $20 billion in logistics over the next eight years.
  6. Most importantly, Alibaba will either be your competition or your biggest ally. You have no choice but to respond.

What you will hear in The Alibaba Effect video is critical and has never been discussed in detail from a supply chain perspective. Alibaba is changing the game when it comes to supply chains in the U.S.  Watch this video so you can plan your counteroffensive now and lead your company to success in omnichannel.

 

More Resources

Video: The New Demand-Drive Operations – The Only Operations Strategy for Success in Multichannel

Paper: Demand-Driven Supply Chains – Getting It Right for True Value

Video: The Right Fulfillment Center for E-Commerce

Photo Credit: epSos .de

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  • All of the information in this blog is the result of Tompkins International's research of public information. There is no information presented that comes from any proprietary source. Tompkins International does not discuss information about their clients unless that information has been published.